AN INTERNATIONAL COMPARISON OF AGRICULTURAL POLICY: CANADA, THE FEDERAL REPUBLIC OF GERMANY, AND THE UNITED KINGDOM

KENNETH FOSTER HARLING, Purdue University

Abstract

Government interventions which distort price signals to producers and consumers have played a major role in altering the economic environment in which agriculture operates. Considerable effort has been devoted to trying to understand the consequences of particular interventions, but almost no effort has been made to assess the economic consequences of the overall structure of government intervention. To better understand the implications of government interventions is extremely important. This study focuses on analysis of the price distortions affecting producers and consumers of agricultural commodities in an effort to quantify the magnitude of the distortions and provide knowledge of the consequences of such manipulation. The price distortion facing the producer is usually different from that facing the consumer because numerous measures which affect only the price signal perceived by one or the other are often applied above and beyond measures affecting the market price to both. The consequences of these distortions are calculated here with a modified partial equilibrium framework using Marshallian economic surplus. The modified model is developed by integrating the concepts of both effective and nominal protection into the standard analysis. The comparative aspect of the study is developed by examining and comparing intervention affecting wheat, rye, barley, oats, potatoes, beef, pork, poultry and eggs in Canada, the Federal Republic of Germany, and the United Kingdom. The reason behind this selection was twofold: (1) each of the commodities is relatively important in terms of domestic production and consumption, and (2) each of the countries has similar production technologies and consumers with similar product preferences, but have elected to use very different mixes of policy instruments. Calculations of various measures are made based on data for a three year period, 1975-1977. The measures calculated include those quantifying: the magnitude of price distortions (nominal rates of protection, net nominal rates of protection, effective rates of protection, effective subsidies), the changes in quantities produced, consumed and traded due to the price distortions, and the welfare consequences of price distortions (deadweight losses, and changes in producer and consumer surplus). The empirical evidence provides many insights into the aspects of policy intervention affecting each of the commodities in each of the countries. Results indicate that no country is indisputably less interventionist than the others--differences among commodities within each country are greater than the differences observed among countries. Another contribution of the study is the demonstration of the importance of going beyond market price distortions alone to include implicit measures which distort prices, and in the case of producers, to also include the effect of distortions in the prices of intermediate inputs used. Finally, the results demonstrate the danger of limiting analysis of policy to a particular measure. When the results of a measure for different commodities are ranked in order of importance, this ranking may differ substantially from the ranking of the results of a different measure. This suggests a proper appreciation of the impact of policy required substantial analysis.

Degree

Ph.D.

Subject Area

Agricultural economics

COinS